You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees — before you sell a single product, there are startup costs associated with launching a Massachusetts LLC.
Make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Massachusetts startup fees here.
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The Required Upfront Costs of Forming a Massachusetts LLC
Let’s start by discussing the absolute essentials. You cannot form an LLC in Massachusetts without first filing the Certificate of Organization. The Certificate is the document that officially registers your business within the state. The state charges $500 for this submission.
The Certificate of Organization requires some important information about your business, such as the nature of your business, your mailing address, the managers for the business, your resident agent, and more.
But what if you’re not forming a new business in Massachusetts, and instead you’re expanding a pre-existing LLC from another state with a Massachusetts foreign qualification? In this situation, you would instead file the Foreign Limited Liability Company Application for Registration. This document is pretty similar to the Certificate of Formation, but it also requests information about the jurisdiction where your LLC was originally formed. This form also costs $500 to file.
Next, while there is no general state business license in Massachusetts, depending on the nature of your business, you may still need to obtain professional or industry-specific licenses. There are many different licenses and permits that might apply to your Massachusetts LLC, and some of them might cost you money when you apply for or renew them, so this is another potential expense you’ll need to keep an eye out for.
For many LLCs, these are the only upfront expenses that are required. That said, your Massachusetts LLC will certainly have other costs down the line, and there are some optional expenses as well. Understanding how many of these fees will apply to your business is the key to figuring out exactly how much it will cost to form your Massachusetts LLC.
The Optional Upfront Costs of Forming a Massachusetts LLC
The first optional expense for a Massachusetts LLC is name reservation. The only time you need to reserve a business name for a Massachusetts LLC is if you’re not yet ready to form the business but you want the name to be available when you are ready. It costs $30 to reserve a business name in this state, which gives you exclusive rights to the name for 60 days.
However, considering that you can simply form your business instead, the $30 name reservation fee is usually unnecessary.
Another expense that may or may not apply to your business is an LLC formation service fee. While some entrepreneurs choose to fill out and file their own Certificate of Formation, and others opt for the much more expensive route of hiring an attorney to handle it, our preferred option is hiring a business formation service.
These companies can provide the professionalism and peace of mind you receive from having a true expert forming your LLC while charging significantly lower prices than any lawyer you’ll ever find. We’ll discuss LLC formation services again in a bit to help you figure out which of the many companies you should hire.
Many LLCs also hire resident agent services, and these companies also charge their own fees. Every LLC needs a resident agent, as this is the LLC’s point of contact for the state. If the state needs to send you any important documents (like service of process), they will deliver them to your resident agent, who will inform you and forward the documents to you. (If you need to change Massachusetts resident agents or resign as a Massachusetts resident agent, read our full guides on these topics.)
You may also want to secure your business domain name and website, which will add another expense to your list. We always advise our readers to claim their domain names as soon as possible after filing the Certificate of Formation because it’s important to get the URL you want for your website.
Especially considering how much the business world operates online these days, getting the domain name you want is almost as important as securing your desired LLC name. The cost of a domain name can vary a bit, but for the most part, this should cost you $20 per year or less.
The Required Ongoing Maintenance Costs of a Massachusetts LLC
No matter if you’re forming a brand-new business in Massachusetts or transferring a pre-existing business into Massachusetts from another state, your LLC will need to file Annual Reports every year. The Annual Report keeps the state up-to-date on some important information regarding your business. And like the initial registration, the Annual Report is pretty expensive: $500.
Depending on your LLC’s business pursuits, you will almost certainly need to pay some form of ongoing business taxes as well. For instance, if your business sells any products or services, you’ll probably need to register for sales and use taxes in order to properly start a business.
If your LLC has employees, it will also need to pay unemployment insurance tax. Based on the nature of your business, there could be additional taxes on top of these, so make sure you check with the Massachusetts Department of Revenue to make sure you’re paying all of the taxes you should be.
The Optional Ongoing Maintenance Costs of a Massachusetts LLC
Much like you can hire an LLC formation service and a resident agent service, many of these same companies offer ongoing compliance assistance. If you’d like a reputable company to draft and file Annual Reports on your behalf, you’ll need to pay their yearly service fees, on top of Massachusetts’s state fees.
Business insurance is another ongoing expense that many, but not all, LLCs will require. It’s very difficult for us to get into much detail on this topic because there’s so much variance from business to business regarding insurance coverage needs.
Still, for example, any business that serves customers from a physical retail location should have business liability insurance to protect against common risks like slip-and-fall accidents. Depending on the nature of your business, this may be just the tip of the iceberg when it comes to your insurance responsibilities.
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Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
Failure to submit a required filing — most commonly an annual report — will land your LLC in “delinquent” status, and it’s not a fun place to be. It means that you’re out of good standing with the state and can no longer do things like foreign qualify in other states, apply for business loans, renew certain professional licenses, and more. Plus, if you fail to file two annual reports in a row, your LLC will be administratively dissolved and prohibited from doing business in the state until it reconciles its outstanding filings/fees and files for reinstatement.
And if you don’t pay any required taxes? You will be charged a penalty of 1% of the outstanding amount per month (up to 25%). In short, keeping up with your filings and fees will save you a lot of trouble, stress, and money in the future.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Massachusetts.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees — like annual reports and taxes — so your business doesn’t fall out of good standing.
The Best Massachusetts LLC Formation Services
Does the LLC formation process sound like a hassle? Would you rather pay someone else to form your LLC while you focus on actually growing your business? Fortunately, there are plenty of reputable LLC formation services out there that can provide professional assistance for a mere fraction of a lawyer’s fees.
There are dozens of different companies that offer Massachusetts LLC formation services these days, and it can be difficult to discern which of them is your best option. That’s why we put together this website as a comprehensive guide to the top-rated business formation services available online.
ZenBusiness (which has formed more than 400,000 businesses) has an inviting offer for LLC formations that is among the best options nationwide. We pride ourselves in offering the most bang for your buck in the industry.
We offer LLC formations for free (only pay your state fee). In addition, we receive spectacular feedback from our clients, with more than 10,000 reviews available online and nearly universal acclaim from our customers.
Furthermore, ZenBusiness is a public benefit corporation, which indicates that we’re focused on more than simply maximizing our profits. We have a partnership with Kiva.org to help lift people out of poverty through financial lending, and ZenBusiness also loans money to help women- and minority-owned businesses get off the ground.
It’s tough to top what ZenBusiness has to offer.
LegalZoom is the biggest name in the LLC formation service industry. They’ve been a prominent player in this market for years, and they advertise more than most of their competitors combined.
They also serve a very high volume of customers, so there’s no denying that LegalZoom is a popular service. In addition, LegalZoom has thousands of mostly positive customer reviews available online.
However, their pricing is acceptable but uninspiring. Their LLC formation packages are threadbare and lacking value compared to many of their competitors.
If you prioritize using the company with the largest volume of customers or the biggest brand power, LegalZoom is certainly worth a look.
Are you interested in receiving personalized customer support? If so, give Northwest Registered Agent a look. Northwest provides all of its clients with support from its Corporate Guides.
These highly trained representatives walk you through each step of the formation process, and you can contact your Guide at any time to ask questions or get advice.
Northwest’s pricing starts at $225, and that rate includes 12 months of their registered agent service.
While their competitors typically only scan the government documents they’re legally required to scan, Northwest scans all documents they receive on your behalf.
They provide solid overall value, and they also receive strong reviews from their customers, albeit in a smaller volume of feedback than ZenBusiness has to offer.
Key Steps for Starting a Massachusetts LLC
- The first step to forming a Massachusetts LLC is to come up with a good name for your business. You’ll want to make sure the name you want is still available and hasn’t already been claimed by another business, so you’ll need to search the state’s business database to verify its availability.
- Next, you’ll need to choose your resident agent. While you can legally serve as your own resident agent in Massachusetts, this role can actually be more of a hassle than you might expect. That’s why we always recommend hiring a reputable resident agent service that can handle the responsibility of this position on your behalf.
- The third step involves the preparation and filing of your Certificate of Organization. You’ll need to fill out the paperwork and pay a $500 fee. Once the state processes this document, your LLC will be officially open for business!
- That’s not the end of the road for the startup process though, as you’ll also need to create an operating agreement for your LLC. There is no legal requirement for Massachusetts LLCs to have written operating agreements, but it’s still an extremely important element of any LLC. The operating agreement is an internal document that outlines how your LLC will operate, and there are several aspects of this document that can prevent messy ownership disputes down the line.
- You will also need to acquire a federal tax ID number (also known as an EIN, or employer identification number). This is essentially a Social Security number for your business, as it is a nine-digit code used to file taxes, hire employees, open business banking accounts, and more.
- Next, you’ll need to register for any relevant taxes with the Massachusetts Department of Revenue, and also obtain all licenses and permits that apply to your business type. Keep in mind that, depending on the nature of your business, you might require licenses from the federal, state, county, and municipal governments.
Once you’ve finished all of these steps, you’re ready to operate a compliant business entity with the state of Massachusetts!
Key Steps for Maintaining a Massachusetts LLC
After you’ve completed all of the items in the previous section, you’ll need to focus on maintaining your LLC. The first step in this process is to open a business bank account. This will help you keep your business and personal expenses entirely separate, and it will also help immensely with your accounting and taxation responsibilities.
You should also keep detailed records of every financial transaction that takes place with your LLC. This means maintaining a file of invoices for every purchase and sale you make, along with information regarding your employees or contractors and the work they perform for your business.
As we already mentioned, annual reports are a key component of LLC maintenance in this state, and there are harsh financial penalties for delinquent reports. Additionally, you might want to hold an annual meeting to discuss goals and priorities for your LLC, although this is an optional step.
We’ve discussed many Massachusetts LLC costs in this article, some of which will apply to all LLCs in the state. As you can see, there are also plenty of expenses that will only affect certain LLCs. The most important takeaway is that you shouldn’t try to find loopholes to get out of paying these fees, as the consequences are potentially severe and easily avoidable.
That said, there are still some ways you can make financially smart decisions on your LLC formation and maintenance costs, like choosing an affordable business formation company to oversee your Certificate of Organization filing and provide resident agent service.
Frequently Asked Questions
Before we wrap things up, let’s take a look at some of the most common questions we hear from readers regarding the LLC formation process in Massachusetts.
What are the state business tax rates in Massachusetts?
If your LLC is taxed like a sole proprietorship or general partnership, you’ll need to pay taxes on your business income at the state’s personal income tax rate of 5%. If your LLC is taxed like a corporation, you’re required to pay Massachusetts’ 8% corporate income tax on your business revenue.
How quickly does Massachusetts process LLC formations?
The Secretary of State should be able to process your LLC’s formation within just 1-2 business days.
How many small businesses are there in Massachusetts today?
The state of Massachusetts is home to nearly 600,000 small businesses. Entrepreneurs of all backgrounds and business types find that Massachusetts is a great place to own and operate a small business.
What are the top small business resources and websites in Massachusetts?
The Massachusetts chapter of the Small Business Development Center is a great place to start, as they offer a wide variety of tools and resources for Massachusetts LLCs. The U.S. Small Business Administration’s Massachusetts District Office is another valuable resource, and the state’s small business resource page also has plenty of good info.
Should I form my LLC in Massachusetts, or choose a state like Delaware or Wyoming?
Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.
However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.
What is the absolute minimum cost to form a Massachusetts LLC?
The “cheapest” possible price tag for LLC formation in Massachusetts is $500, which covers the cost of filing your Certificate of Organization. All other upfront expenses for a Massachusetts LLC formation are optional.
How much does it cost to form a corporation in Massachusetts?
In many states, it’s more expensive to incorporate a business into a corporation than it is to form an LLC. But in Massachusetts, that may or may not be the case. The base fee for the Articles of Organization (the document that officially registers your business within the state) is $275. However, that fee only applies up to 275,000 shares; after that, the fee raises $100 for every additional 100,000 shares.
How much does ongoing LLC maintenance cost per year in Massachusetts?
The annual maintenance cost for your business will largely depend on what industry you’re in, as every industry has different renewal requirements. Some businesses might not even need an industry license, or they might renew less often. That said, there is one annual expense that every business will have regardless of industry: the $500 Annual Report fee.
How many small businesses are there in Massachusetts today?
There are more than 715,000 small businesses currently operating in Massachusetts, comprising all but 0.5% of businesses in the state. Approximately 46% of the Massachusetts workforce is employed by one of these businesses.
Cost to Start an LLC in All 50 States
We break down the LLC costs in detail in all 50 states. View all of our State LLC Costs guides below.
- Cost to Start an Alabama LLC
- Cost to Start an Alaska LLC
- Cost to Start an Arizona LLC
- Cost to Start an Arkansas LLC
- Cost to Start a California LLC
- Cost to Start a Colorado LLC
- Cost to Start a Connecticut LLC
- Cost to Start a Delaware LLC
- Cost to Start a Florida LLC
- Cost to Start a Georgia LLC
- Cost to Start a Hawaii LLC
- Cost to Start an Idaho LLC
- Cost to Start an Illinois LLC
- Cost to Start an Indiana LLC
- Cost to Start an Iowa LLC
- Cost to Start a Kansas LLC
- Cost to Start a Kentucky LLC
- Cost to Start a Louisiana LLC
- Cost to Start a Maine LLC
- Cost to Start a Maryland LLC
- Cost to Start a Michigan LLC
- Cost to Start a Minnesota LLC
- Cost to Start a Mississippi LLC
- Cost to Start a Missouri LLC
- Cost to Start a Montana LLC
- Cost to Start a Nebraska LLC
- Cost to Start a Nevada LLC
- Cost to Start a New Hampshire
- Cost to Start a New Jersey LLC
- Cost to Start a New Mexico LLC
- Cost to Start a New York LLC
- Cost to Start a North Carolina LLC
- Cost to Start a North Dakota LLC
- Cost to Start an Ohio LLC
- Cost to Start an Oklahoma LLC
- Cost to Start an Oregon LLC
- Cost to Start a Pennsylvania LLC
- Cost to Start a Rhode Island LLC
- Cost to Start a South Carolina
- Cost to Start a South Dakota LLC
- Cost to Start a Tennessee LLC
- Cost to Start a Texas LLC
- Cost to Start a Utah LLC
- Cost to Start a Vermont LLC
- Cost to Start a Virginia LLC
- Cost to Start a Washington LLC
- Cost to Start a West Virginia LLC
- Cost to Start a Wisconsin LLC
- Cost to Start a Wyoming LLC